I examine the possibility of information‐based trading in a multiperiod consumption setting. I develop a necessary and sufficient condition for trade to occur. Intertemporal substitution introduces a desire to correlate current consumption with future aggregate shocks. When agents have heterogeneous time‐inseparable preferences, information differentially affects relative preferences for current and future consumption, making information‐based trading mutually acceptable. The no‐trade result continues to hold if there is no aggregate shock, or if agents have either homogeneous or time‐separable preferences.

I find that shadow bank money creation significantly expands during monetary-tightening cycles. This “shadow banking channel” offsets reductions in commercial bank deposits and dampens the impact of monetary policy. Using a structural model of bank competition, I show that the difference in depositor clienteles quantitatively explains banks’ different responses to monetary policy. Facing a more yield-sensitive clientele, shadow banks are more likely to pass through rate hikes to depositors, thereby attracting more deposits when the Federal Reserve raises rates. My results suggest that monetary tightening could unintentionally increase financial fragility by driving deposits into the uninsured shadow banking sector.

Analyzing hand-collected data on the corporate subsidiary locations of all publicly listed firms in China, we find that “hometown firms,” firms headquartered in the hometown of the key political leaders of the province, set up more subsidiaries in their home provinces. This effect is stronger for hometown firms that are non-state owned or without political connections, and more prominent in a political turnover year and the previous year. After a hometown firm sets up more subsidiaries in a key political leader's home province, the firm will enjoy more preferential government policies such as those related to subsidies and taxes. We find evidence consistent with the positive externalities of these subsidiaries for other firms in the cities where they reside, i.e., local firms. The number of these subsidiaries is also positively associated with the local employment rate. Various causality tests and robustness checks confirm the validity of our results. Our results provide some of the first evidence on the importance of corporate subsidiary locations, showing political geography significantly influences corporate geography.

We connect conservative accounting to the cost of capital by developing an accounting model within an asset pricing framework. The model has three distinctive features: (1) transaction-cycle-conformity, where the book value equals the value of cash at the beginning and the end of a cash-to-cash transaction cycle; (2) a revenue recognition principle, where uncertainty affects the amount of revenues recognized; (3) a matching principle, where expenses are matched with revenue with a conservative bias due to uncertainty. We demonstrate how the growth rate of expected earnings, the accruals-to-cash ratio, and the expected earnings yield relate to the expected stock return.

This paper documents and analyzes the gender gap in the online credit market. Using data from Renrendai, a leading peer-to-peer lending platform in China, we show that lending to female borrowers is associated with better loan performance, including a lower probability of default, a higher expected profit, and a lower expected loss than for their male peers. However, despite the higher creditworthiness, we don't find any measurable gender impact on funding success rate, meaning that female borrowers have to compensate lenders by providing higher profitability to achieve a similar funding probability. These evidences indicate the existence of a gender gap that discriminate against female borrowers. Further analysis implies that this gender gap is independent of the amount of information disclosed by borrowers.

We examine the impact on a firm when it is forced to switch its bank relationship from one branch to another branch of the same bank, and how the firm’s information opacity (as proxied by the frequency with which the firm provides financial statements to the bank) moderates the consequences of relationship loss. We find the effect depends on the relative balance between the hard accounting information provided to the bank and the soft information about the firm due to its prior branch relationship. We show the loss of soft information provided to loan officers at the new branch, as a result of the forced branch switch, has a significant effect on the cost, maturity, and availability of loans from the new branch. Furthermore, we document the moderating effect of accounting information opacity on loan conditions upon relationship loss.